Danny Doesn’t Do Demo Day

Joe Milam
5 min readMar 6, 2019


or….How NOT to Invest in Startups

First, apologies for taking such liberties with Nobel Prize Winner Dr. Daniel Kahneman’s name. I have never met the man but am a big fan.

But I couldn’t resist the alliteration. At least I avoided titling it ‘Dr. Dan Doesn’t Do Demo Day.’

And let me also say that demo day is a wonderful vehicle to celebrate the accomplishment of making the way into, doing the work of, and graduating from an incubation/acceleration program.

It is just a bad way to select startups for investment.

Danny said…

Or rather, his work explained why it is such a bad process when making decisions, particularly financial decisions.

His work:

And frankly, it seems a bit disingenuous to sell Demo Day to startups as a way to get investors. Startups deserve better for the equity/time/adulation they give to the organizations hosting massive pitch contests. The entrepreneurs’ time would be better spent working to build their companies, and transparently communicating those successes and failures.

Pitchfest Industrial Complex

Boy I wish I coined that phrase. I believe the first time I heard it was in a comment from Ross Baird of Village Capital. Don’t know if he got it from somewhere else.

Unless you are Y Combinator, and you have a room full of investors that have already had exit proceeds from prior alums (read; ‘house money’ to toss at some from the next batch), demo day is a graduation ceremony sold to the local investor & professional communities as an opportunity to interact with potentially compelling investment opportunities.

There will of course be the requisite fireside chat with ‘experts’, maybe a Shark Tank-like lightning round of other ‘experts’ analyzing the pitches, and naturally an awards ceremony on the best idea, with lots of dramatic music, clapping, selfies taken, etc.

This reminds me of what is often said about how an alien would view Earth’s culture and advancement if they landed in Las Vegas first.

Serious investors don’t do demo day. Period.

You don’t see the CIO ( Chief Investment Officer) of an institutional investment firm attending a sound-tracked, selfied, high-fiving party to find where to allocate capital that will optimize the nominal Alpha of the efficient frontier the Investment Policy Committee has approved.

Nor does the Consultant selected by the CIO (naturally approved by the Investment Policy Committee) go to a 1 day event riddled with flyers, banners, samples, cool give a-ways, etc., to select the investment firms necessary to fulfill the investment strategy.

Nor do the investment firms selected by the Consultant (approved by..etc) go to a 1 day event, with all the companies they may select to populate/invest in the fund specific to the asset class they’ve been hired to optimize the Alpha, given the Beta of that specific asset class.

Seems kind of silly now, doesn’t it….

The reason is each of these professionals have a fiduciary duty to use all relevant information specific to their asset class and mandate to optimize the decision-making processes and outcomes.

Fake It ’Til You Make It

The Pitchfest Industrial Complex (PIC) can be forgiven given the absence of more ‘System 2’ methods of thinking (the ‘slow’, logical, analytical form of thinking as defined in Thinking Fast & Slow) employed & applied when presenting information about cohorts ready for investment. From the evidence, there is probably an absence of the basic knowledge of what professional investors actually do to make proper, fiduciary duty-fueled decisions.

After all, venture capitalists, angel investors, managers of accelerators, mentors, etc., these are not professions.

Read that again…

That’s not to say they are not compensated for the time they put in pursuing any of the above mentioned rolls or functions. They are compensated. Sometimes quite handsomely.

Nor does this mean individuals operating in these organizations aren’t well intended, or are not professional in their pursuits.

But those elements of entrepreneurial ecosystems; vcs, angels, accelerators, etc., these are not professions.

Educational requirements, formal training, licensing, required continuing education credits, industry oversight…none of these exist in the entrepreneurial world.

Entrepreneur as Gladiatorial Artist

Entrepreneurs are not, nor should they, be required to adhere to these standards. They are the creators, the artists, the ‘man (or woman) in the arena’.

You don’t create works of art by ‘painting by numbers’. Starting a company, recruiting others to join you, investors to buy into your vision, customers to believe you takes a remarkable amount of courage, fearless optimism, denial of reality, and a drive to change what is accepted as conventional wisdom.

Stuff Merchants

The other participants in entrepreneurial ecosystems, the peripheral agents, are not ‘the man (or woman) in the arena’.

They supply the gladiators with….stuff. Valuable stuff….but stuff nonetheless.

Yet there is no ‘permit’ required, no licensing expectations to sell ‘stuff’ to the gladiators, whether the ‘stuff’ is advice or training (accelerators, mentors) or money (vcs, angels).

In virtually every other marketplace (except maybe a farmer’s market or swap meet), the merchants selling ‘stuff’, whether they are professional services providers (from hair stylists to nail salons, to physical therapists, accountants, lawyers, doctors, etc.) to financial services (insurance sales, real estate, stock brokerage, mortgage brokerage, trust officers, Registered Investment Advisors, et. al.), they all have to have, at a minimum, some level of training and licensing. The more ‘mission critical’ the product or service, the more rigorous the training/licensing/certification/continuing education/oversight.

These requirements are the evidence of professions.

But none of these training/licensing/certification/continuing education/oversight requirements are necessary to sell ‘stuff’ to entrepreneurs.

Professionals Welcome…and Needed

If American entrepreneurism is to be optimized, if the chronic funding gap is to be solved across the country, if investors are to actually receive the appropriate levels of Alpha (spot quiz!) for the $trillions on the sidelines to invest, entrepreneurism needs to raise it’s game. It needs to become more professional.

And for those investors heretofore on the sidelines looking in — good for you. Your money was most likely treated better over the last 30 years sitting in a Russell 2000 index fund.

But even that easy ride has likely come to an end.

With expected returns on the various asset classes traded in the public markets now in the mid single-digits range, you will actually need to look elsewhere for decent nominal Alpha..

Don’t worry, there is ample opportunities in the private markets.

And you don’t need to be a professional venture capitalist to succeed. Wait, scratch the word ‘professional’…

Just do what comes natural. Manage risk. Diversify. Buy low, which means you don’t just focus on the overbought markets of Silicon Valley, maybe NYC and Boston to assemble your portfolio.

Think duration management, geographic arbitrage, Smart Beta filtering. Apply the same tools and training you have already been through — which is probably more training than 90% of the current participants.

Just act like the fiduciary you already are.

You are already a professional.



Joe Milam

Multi-family office originally at 3000 Sand Hill, mid-wife to Band of Angels, now looking to mobilize ‘legacy angels’ into the ecosystem.